9-1

What Is Business Ethics?

Business ethics involves applying general ethical principles and standards to business activities, behavior and decisions

Ethical principles in business are not different from ethical principles in general

Business actions are judged

By general ethical standards of society

Not by more permissive standards

9-2

Ensuring a Strong Commitment to Business Ethics in Multinational Companies

Three schools of thought about the extent to which ethical standards apply across countriesand cultures exist:

Ethical Universalism

Ethical Relativism

Integrative Social Contracts Theory

9-3

Concept of Ethical Universalism

According to the school of ethical universalism . . .

Same standards of what is right and what is wrong are universal and transcend most cultures, societies, and religions

Universal agreement on basic moral standards allows a multinational company to develop a code of ethics that is applied evenly across its worldwide operations

9-4

Examples of UniversalEthical Principles or Norms

Honesty

Trustworthiness

Respecting the rights of

others

Practicing the Golden Rule

Avoiding unnecessary

harm to

Workers

Users of a company’s

product or service

9-5

Concept of Ethical Relativism

According to the school of ethical relativism . . .

What is ethical or unethicalmust be judged in light of local moral standards and can vary from one country to another

Companies a code of conduct based upon the principle of ethical relativism assume that local morality is an adequate guide for ethical behavior

9-6

Drawbacks of Ethical Relativism

The ethical relativism rule of “when in Rome, do as the Romans do” presents problems

It is ethically dangerous for company personnel to assume that local ethical standards are an adequate guide to ethical behavior

» What if local standards condone kickbacks and bribery?

» What if local standards blink at environmental degradation?

9-7

Integrative Social Contracts Theory

According to the integrative social contracts theory, the ethical standards a company should try to uphold are governed by both

1. A limited number of universal ethical principles that put ethical boundaries on actions and behavior in all situations

and

2. The circumstances of local cultures, traditions, and values that further prescribe what constitutes ethically permissible behavior and what does not

9-8

Prioritizing Ethical Standards

Integrative social contracts theory

provides that “first order” universal

ethical norms always take

precedence over “second order”

local ethical norms when local

norms are more permissive

9-9

Corporate Social Responsibility

Social responsibility calls for

companies to strike a balance between

1. Its economic responsibility to

shareholders

2. The legal responsibility to comply with the

laws of the countries where it operates

3. The ethical responsibility to abide by

society’s norms, and

4. The discretionary philanthropic

responsibility to meet the unmet needs of

society